What are Credit Scores?

Your credit score is basically a number, ranging from 300 to 850. The higher your credit score the better you look in the eyes of banks, lending agencies, credit card companies, employers and anyone else interested in your credit. Generally speaking, a score above 740 is excellent; 700-739 is considered very good; 680-699 is good; 640-679 is fair; 620-639 poor; and anything below 620 is very poor.
Your credit availability decreases and your interest rate rises as your score slides lower on the scale – the reasoning is the lower your score, the more risky you appear to a lender (i.e., anything below 620 is considered a very high risk). It is important to remember that your credit score is not available on your credit report – they are two separate things.

What’s the Difference between Credit Score and Report?

Your credit report contains a history of the way you have handled your credit. From car loans, student loans, mortgages, various credit card bills, how much available credit you have, if you’ve gone bankrupt or have a lien, or have failed to make payments – everything that falls under the category of credit is on that report. You can get your credit report for free, but as stated above, your credit score is not included on that report.
Your credit score is the ultimate outcome of that report. Your credit history determines your credit score – everything you’ve ever done credit-wise is condensed into three numbers. That’s why it’s so important to maintain a high credit score. Everyone, from lending institutions to future employers look at that score and form an opinion about you and your attitude toward finances.

Who Determines My Credit Score?

The main credit score model is the Fair Isaac Corporation (FICO) model. The FICO credit score is based on a mathematical formula that dates back to the 1950s, and it is the most important score in the U.S. According to FICO, it is the industry standard “used to determine how much money you can borrow and how much interest you will pay.”
The FICO model uses five things to determine your credit score. Each one has a percentage rate based on its importance. You can learn more about how credit scores are calculated on “What Determines My Credit Score?” from New Leaf Credit.

How do I Obtain a Credit Score?

You can obtain a credit score from FICO or from any of the three credit reporting agencies (Equifax, Experian or TransUnion). Unlike credit reports, your credit score is not free of charge, but you can order your credit score when you order your free credit report.